City $3 million apart from Twin Pines, Neighborhood Partners in settlement offers over DACHA

More than $3 million separate the city of Davis and Neighborhood Partners LLC/Twin Pines Cooperative Foundation in settlement offers to resolve the long-standing legal disputes over the Davis Area Cooperative Housing Association, The Enterprise has learned.

The city recently released several settlement offers that shed light on what Twin Pines and Neighborhood Partners want from the lawsuits they have lodged against the city and DACHA.

Neighborhood Partners, a for-profit affordable housing developer, and Twin Pines, a nonprofit cooperative lending institution, have made two settlement offers to the city, one in January and one in February. Both seek approximately $3.5 million for legal fees, management time and either cash or the equivalent in market value they believe Twin Pines created by helping form the affordable housing association.

The major difference in what the two entities have offered compared to what the city has offered is what each believes Twin Pines deserves.

As city leaders disclosed in March, Davis offered a framework for a settlement to Neighborhood Partners in April 2010 for $300,000 that, if accepted, would have put an end to the lawsuits and kept the DACHA homes affordable and operational, the city said.

But David Thompson, president of Twin Pines and co-owner of Neighborhood Partners, said because the city’s proposal did not include any compensation for Twin Pines, the offer was not appropriate.

Talks broached

Before Thompson and Luke Watkins, co-owner of Neighborhood Partners, made a return offer, the pair attempted to meet with the city to reach resolution. However, the two sides never were able to meet.

“They don’t want to mediate,” Watkins said Tuesday. “They don’t want to sit down in a room with a professional mediator to seek a solution.”

City Attorney Harriet Steiner said, however, that the reason the City Council never agreed to mediation was because the two sides were so far apart in demands that mediation would not have yielded any results.

“At the time, the city didn’t think that the timing was right,” Steiner said. “Mediation works really well when the parties are closer to agreement — when we’re talking about money or only money or something like that — but at the time mediation was requested … we didn’t think it would result in anything meaningful at the end.”

Soon after the discussion of mediation fizzled, the city foreclosed on the 20 DACHA properties, prompting Thompson and Watkins to pursue further legal action.

“On July 1, 2010, they foreclosed,” Watkins said. “Rather than saying ‘OK, let’s try and resolve this,’ they just foreclosed and wiped us out and then that put us in the position of having no other choice but to file lawsuits. Neighborhood Partners had to file lawsuits.”

Deal offered

After the court action was taken, settlement talks resumed and Twin Pines and Neighborhood Partners made the first stab at a deal.

In January 2012, the two entities offered a settlement asking the city to sell the DACHA homes at market rate and then lend $3.5 million of the sale proceeds to Twin Pines for reinvestment in another affordable housing project in Davis (after paying off the rest of Twin Pines and Neighborhood Partners’ legal fees).

The offer also proposed that along with Twin Pines’ $3.5 reinvestment, the city would lend $3.5 million more to help fund the new affordable housing project.

According to Thompson and Watkins’ attorney, the deal was structured this way in order to keep comparable affordable housing in Davis. By transferring the funds generated by the sale of the homes to a charitable organization (Twin Pines), the city could use the market value to create more affordable housing.

But it appears that city leaders weren’t interested in the deal.

The city responded by offering a $280,000 cash settlement, which again it hoped would globally resolve all conflicts between the city, DACHA and Twin Pines and Neighborhood Partners.

“The city is not interested in pursuing another project at this point, especially given where we’re at with redevelopment (which dissolved in February),” Steiner explained Tuesday. “We’re not in a position to move forward with another project.”

However, Thompson and Watkins said that in April 2011, Steiner made an offer to their attorney to contract with Neighborhood Partners on a new development in Davis where the city would pay extra in developer fees, possibly as another form of settlement.

But Thompson could not accept, especially without any consideration of what Twin Pines was still owed.

“While my clients appreciate your offer to commit to other projects and allow for a larger developer fee payment, they are not entirely comfortable with this option,” wrote Louis Gonzalez, the developers’ attorney, in response to Steiner’s proposal.

No agreement was ever made to pursue another development.

$3.5 million sought

In response to the $280,000 cash offer made by the city in January, Thompson and Watkins’ attorney, who was disappointed by the “lowball” offer, said his clients would be willing to monetize their previous settlement proposal.

In that monetized settlement offer, Neighborhood Partners said it would accept about $343,000 to pay off the rest of the judgment it was owed after DACHA terminated its contract, $410,000 for its own legal fees and $200,000 for other compensatory management time.

Then, separately, Twin Pines also would accept approximately $2.5 million, which it believes it is owed for its efforts in keeping the cost of the homes from rising to market rate and protecting their affordability.

The city responded by reiterating its $280,000 offer because it does not believe Twin Pines is owed anything.

“We do not believe that Twin Pines could recover for value it never had, and never paid for,” Steiner said in a response letter to Gonzalez. “Twin Pines was repaid for every dollar it (lent) to DACHA when DACHA was first formed. We do not believe that Twin Pines is entitled to $3 million in damages or any other amount in damages for housing it did not create, and did not fund.”

According to Thompson, however, Twin Pines isn’t looking for a $3 million payday. It’s simply asking for the market value it created by helping form the housing cooperative — in other words, the affordability realized by purchasing the homes for hundreds of thousands of dollars less than market value — either to be reinstated into the DACHA units, or into another form of affordable housing in Davis.

“We were never interested in getting any money,” Thompson said. “It was just a guarantee of the permanence of the co-op.”

He said if Twin Pines is awarded the money asked for in its latest settlement offer, those funds still would go back into affordable housing.

Trials looming

If the two sides cannot reach a settlement, the Twin Pines lawsuit is scheduled to go to trial in October and the Neighborhood Partners lawsuit in April 2013.

DACHA was formed in 2002 as a limited-equity cooperative housing association where members paid an up-front cost — in addition to monthly association fees, or carrying charges — which they would receive back if they decided to leave the association.